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Klein/Kliff on Part D and the ACA

July 17, 2013 at 12:30 pm

Austin Frakt

Ezra Klein and Sarah Kliff just posted a worthwhile long-read on implementation of the Affordable Care Act (ACA). One part at the end caught my attention because it relates to the theme of my recent JAMA Forum post.

Months before it launched in 2006, Medicare Part D was less popular than today’s Affordable Care Act: 21 percent of the public viewed it favorably while 66 percent did not understand how it would work.

The rollout was a disaster. Some seniors who earned too much to qualify for subsidies received them anyway. Some low-income enrollees who should have received financial aid didn’t. On Fox News Sunday, then-Minority Leader John Boehner didn’t mince words. “The implementation of the Medicare plan has been horrendous,” he said.

Today, Medicare Part D has more than 50 million beneficiaries and is extremely popular. In a survey last October, over 90 percent of enrollees described themselves as satisfied. “The temporary issues were just that, temporary,” said Mark McClellan, who led Medicare during the rollout. “The memories didn’t last that long. In the end, it comes down to how good the insurance coverage is.”

Should we expect a similar trajectory of popularity for the ACA?

The administration contends its signature legislative accomplishment is on a similar trajectory. In fact, officials say, it’s already working better than expected. A recent study by Avalere Health found that the premium bids in the marketplaces were coming in below the Congressional Budget Office’s early estimates.

But Medicare Part D didn’t face the kind of sustained political opposition that Obamacare faces. In 2006, the Senate Special Committee on Aging held a hearing on the then-flailing program. Rather than calling for repeal, Sen. Herb Kohl of Wisconsin, then the top Democrat on the panel, said it was important “to put aside any partisan thoughts to work together to get this program running.”

Though I disagree with many of the arguments offered and “facts” cited by those who oppose the ACA, they are entirely within their rights to do so. However, as I wrote, I expect such vocal opposition to make a difference in program participation. The prior work I described is fully consistent with the view that the more public figures denounce a program, the less those who trust those figures participate. Indeed, isn’t that the point?

Neither the opposition to the ACA nor the technical problems with its design and implementation are reducible to a single issue, and in the aggregate it will be difficult to disentangle whether or not opposition to the ACA, writ large, is a cause of poor performance in some particular dimension or an effect of it.

One of my general rules of thumb for evaluating whether or not a particular therapeutic modality actually works or not (reiki, homeopathy, accupuncture, voodoo death curses, etc) is whether or not it produces any objectively measurable physiological changes in people who are a)unconscious when the treatment is administered or b) don’t believe in it. Eg. effective treatments work whether people are ideologically predisposed to believe in them or not.

The analogy isn’t perfect, but if a piece of legislation requires near unanimous support in order to be properly implemented and function in the manner it was intended to, then it’s a bad (poorly designed) law, for a number of reasons. Foremost amongst them is the requirement for a set of political conditions that never has nor ever will exist in any conceivable reality inhabited by humans. Horrible laws are those that can’t bring about their desired ends even with unanimous support (such universal wage and price controls).

My hunch is that in the final analysis, the ACA will wind up somewhere between these two definitions, due to operational/design flaws that would persist even in an alternate universe where everyone enthusiastically supported it. Time will tell.

I’ll gladly grant that opposition to a law can effect it’s implementation. Having said that – laws can be drafted in ways that minimize the extent to which partisan opposition can compromise or thwart them. This simpler the law, and the more concrete and limited it’s aims, and the more consistent it is with the actual powers vested in congress, the more likely this is. One of the many flaws in the ACA is that it is unfathomably complex, has a great number of nebulous aims, and attempts to use political/bureaucratic mechanisms for purposes that they are ill suited.

Anyhow – it’s clear that it’s not simply people who have always opposed the law that are voicing their opposition to the ACA for ideological reasons. There are now expanding cohorts of people who supported the law that, upon getting a glimpse of the tangible consequences of the law, are opposing key provisions of the law as it was written:

“Time is running out: Congress wrote this law; we voted for you. We have a problem; you need to fix it. The unintended consequences of the ACA are severe. Perverse incentives are already creating nightmare scenarios:”

LL, I see Part D as poor policy. Many people are happy because other people are paying the bill. It solves very few problems and creates a lot more. Prior to passage many of the very expensive medications were provided in brand name form to the poor by the pharmaceutical companies at no charge or at a $15 per month charge. With all the medications out there that were relatively common and prices that were not all that high the solution chosen was unnecessary and wasteful. Part D reduced appropriate competition and in my opinion has led to higher prices on many drugs.

LL, First take note of Walmart’s $4 a month charge for many drugs, but let us get to the drug Lipitor that you mention. I don’t know about your numbers, but in the market place Lipitor or its generics sell for a lot less. Example: In 2012 a store called Meijer was giving Lipitor out for free.

We actually take advantage of Wal Mart’s 90 day option for 4 of our 5 meds – a total of $160 a year for these – or 5th prescription costs about $25/month. We see no need or benefit to Part D.

The other side of having 18% or so of our economy consumed by health care costs is that one person’s “cost” is another person – or firms income. Driving down costs will mean we will be driving down someone’s income – and they will not be happy about that. Medicare Part D is an example of how the drug companies made sure their ox was not the one getting gored.

Built into Obamacare are some perverse incentives for insurers to charge HIGHER premiums – there “margin” has a fixed limit so they are rational if they prefer 20% of $200 a month over 20% of $100 a month…

LL, you are absolutely correct. The costs for most pharmaceuticals is completely overblown while the costs of the less common, but necessary drugs are forgotten. In part I look at Part D as the Merck bailout bill since they were lacking drugs in the pipeline and Part D helped create a floor on drugs.

“Built into Obamacare are some perverse incentives for insurers”

What I see happening is that the one’s most needy are the one’s most likely not to benefit from the bill.